January 2012

LOST to Pirates

by Ivan Osorio on April 13, 2009

in International, Legal, Zeitgeist

The celebrations and congratulations over the U.S. Navy’s rescue of Capt. Richard Phillips are well deserved and proper all around. Yet even after the jubilation has quieted down, piracy in the high seas remains a threat to global trade. That’s important for the U.S. Senate to keep in mind when it again considers the Law of the Sea Treaty (LOST), which, as The Wall Street Journal‘s Bret Stephens noted last November, could present some potential obstacles to American naval action against pirates. I wrote an earlier post about this, but this point is worth repeating:

Article 110 of the U.N.’s Law of the Sea Convention — ratified by most nations, but not by the U.S. — enjoins naval ships from simply firing on suspected pirates. Instead, they are required first to send over a boarding party to inquire of the pirates whether they are, in fact, pirates.

Such an approach could only result in wholesale hostage taking. Capt. Phillips’s ordeal has made the danger that would entail. President Obama’s decision to use deadly force was the right one. Neither he nor his predecessors should be constrained in similar situations in the future.

Renewable Energy Not Necessarily Cleaner Than Coal

by Jonathan Tolman on April 13, 2009

in Energy, Environment, Global Warming

One irony of mandating renewable energy is that it isn’t necessarily any cleaner than coal.  One example of this is North Carolina’s mandate for renewable energy derived from chicken litter waste.   Chicken litter waste is composed of wood shavings and of course chicken droppings.  There are plans to build a chicken litter waste plant in North Carolina and one has already been built in Minnesota.

As it turns out, burning chicken litter waste tends to produce a high level of particulates, high levels of carbon monoxide, high levels of nitrogen oxides, and a high level of arsenic.  The reason the plants produce high levels of particulates and carbon monoxide is because the wood shavings don’t burn as hot as coal and so there is often incomplete combustion.  The high levels of nitrogen oxides come from the fact the chicken waste is high in ammonia and urea.  In fact, chicken waste is often used as a source of nitrogen fertilizer on farms.   The reason for the high levels of arsenic is that most commercial chicken feed contains Roxarsone, which is an arsenic based compound that is added to the chicken feed to prevent the birds from developing parasites.

The emissions at the Minnesota plant are apparently so problematic the Minnesota Pollution Control Agency  has pending legal action.  So much for clean green renewable energy.

LibertyWeek 38: Pirate Warriors on Deck

by Richard Morrison on April 13, 2009

in CEI Projects, Podcast

Your hosts Richard Morrison and Cord Blomquist are joined by special guest co-host Jeremy Lott for a very swashbuckling Episode 38 of LibertyWeek. We start with the rescue of Capt. Richard Phillips from Somali pirates by the U.S. Navy and Special Forces, look into the murky finances of AIG CEO Edward Liddy in Scandal Watch, and figure out what ISPs are up to in Technology News. We also get an update on how West Virginia is about to become even more Wild and Wonderful, and finally we answer the call for wealthy, multilingual volunteers in Olympic News.

Broadband Stimulus Plan: Spend First, Ask Questions Later

by Nick Brown on April 13, 2009 · 1 comment

in Regulation, Tech & Telecom

There has been some noise in technology circles the last week over the FCC comment period or Notice of Inquiry (NOI) in regards to the broadband Internet portion of the American Recovery and Reinvestment Act otherwise known as “the stimulus.”

The NOI allows individuals, association groups, public policy organizations like CEI, and businesses to issue their comments, suggestions, advise—anything really—to the FCC.   This allows “the public” to describe how they feel like the funds should be spent and the best strategy to improve the state of broadband deployment in under-served an unserved areas.

The comment period is intended to help formulate the National Broadband Strategy which is required to be completed one year from the recovery act being signed in to law.  This means that the strategy will come due around the 17th of February 2010.

There is a major problem with the process that is being used in this case.  The majority of the funds will be distributed prior to the completion of this strategy that will decide how best to distribute and use them.  Cart before the horse much?

The US Department of Agriculture who has used the Rural Utilities Services (RUS) division to improve broadband distribution in the past has been awarded funds for distribution from the stimulus.  RUS plans to distribute its roughly $2.5 billion by September 30th, 2009.  The National Telecommunications and Information Administration—who received the bulk of the broadband stimulus funds—will hand out their dollars in three phases occurring Spring of 2009, Fall of 2009, and Spring of 2010.

The bill writers recognized the need to give the issue a good deal of study to attempt to create a solid plan, but the process also seems to indicate that they felt to create new jobs fast, so the funds needed to be spent fairly quickly to provide stimulus to the economy.  This creates a Catch-22 and certainly suggests that maybe these funds shouldn’t have been spent at all, or in the very least that they should not have been tied up in the stimulus.

A year-long strategy session is pointless if you hand out the money before the plan is even drafted, and there is a good chance that the strategy that comes out of the session won’t be implemented because the money will have been spent.

Most likely, the strategy will be proposed and written based on who has the funds, not who could best use them.   So this broadband stimulus is almost certain to fall short of its goal of  increasing broadband access for unserved and underserved areas.

But this is what we should expect from our new, “smarter” government.  The same old, dumb results.

Don’t Change Interchange

by Ryan Radia on April 13, 2009

in Economy, Regulation

Overstock.com President Jonathan E. Johnson recently penned an op-ed that appeared in The Washington Times last week in which he argued for government regulation of credit card interchange fees. I responded to his essay in a letter to the editor that ran in Sunday’s Washington Times:

Overstock.com President Jonathan E. Johnson III overlooks several important facts regarding credit card interchange fees (“Retailers, consumers squeezed,” Opinion, Wednesday).

Much of the $48 billion in interchange fees paid to credit card companies ends back in consumers’ pockets in the form of credit card rewards. Frequent-flier miles, redeemable bonus points and cash-back programs are all financed largely by interchange fees. Consumers can earn rewards totaling 1 percent or more of the amount of purchases made on a credit card.

If interchange fees are as abusive as Mr. Johnson claims they are, why does Overstock.com continue to accept them? The answer is simple: Consumers like the convenience and security of credit cards, and retailers make more than enough from credit cards through increased sales to pay for interchange fees. Retailers unhappy with interchange fees always have the option not to accept credit cards. (Costco Wholesale Corp., for instance, does not accept MasterCard or Visa credit cards.)

Government price controls on interchange fees will shrink rewards programs and force increases in annual cardholder fees – as happened in Australia in 2001, when the Reserve Bank of Australia capped interchange fees. Congress should heed Australia’s experience before interfering with the payments marketplace.

There are, of course, several other serious objections to legislative proposals aimed at curbing — or abolishing — credit card interchange fees  (I’ve blogged on these issues before here and here).  Some members of Congress are supposedly pondering re-introducing the Credit Card Fair Fee Act, which failed to make it out of committee in the last session.  Stay tuned to OpenMarket.org for the latest on the interchange fee debate.

Green Agitators

by Julie Walsh on April 11, 2009 · 2 comments

in Energy, Global Warming

A 15-Year-Old on Global Warming
April 10, 2009

Transcript from Rush Limbaugh show

BEGIN TRANSCRIPT

RUSH: Who’s next? Alyssa, a 15-year-old from Holdingford, Minnesota. Is that right? Nice to have you on the program.

CALLER: Hi, Rush. Thanks. I was going to tell you about a conference about cap and trade that I went to at St. Cloud State, Minnesota, and –

RUSH: Wait a minute. Wait a minute here, Alyssa. You’re 15.

CALLER: Yeah.

RUSH: How did you end up going to a cap-and-trade seminar?

CALLER: My dad got a couple of e-mails about it from Michele Bachmann, and I really wanted to learn more about it.

RUSH: Oh, okay, so Michele Bachmann is your congresswoman?

CALLER: Yes.

RUSH: And so she did a town meeting seminar on cap and trade?

CALLER: Hm-hm.

RUSH: Oh, oh, oh, okay. So your dad wanted to know about it, he took you.

CALLER: He took me and one of his friends.

RUSH: All right, so did you know what cap and trade was before the seminar?

CALLER: A little bit.

RUSH: Do you know more about it now?

CALLER: Yeah.

RUSH: And…?

CALLER: I was going to tell you about the liberals that were there.

RUSH: Oh, good. I love hearing about liberals at seminars.

CALLER: They were actually really rude there, and they had to be talked to by security a couple times.

RUSH: You mean they were disrupting Congresswoman Bachmann?

CALLER: And Chris Horner. Chris Horner was the one that was talking about it.

RUSH: Okay. These are probably community organizers like ACORN, the same kind of people that are the pirates.

CALLER: Yes. And they were screaming questions, and we got these cards that we had to fill out questions on, and instead of that they were screaming them out. And then they asked about green jobs, and he asked them to name a couple of them, and they just shut up after that.

RUSH: Yeah, a green job is a myth. What is a green job? They didn’t have an answer for it?

CALLER: No.

RUSH: What is a green job? How much you make doing a green job?

CALLER: There is no such thing.

RUSH: A landscaper is a green job. You work around things that are green: Grass, weeds, flowers, plants, that sort of thing.

CALLER: Yeah.

RUSH: Well, I’m glad that you got to see this. Was this the first time that you had seen in person this kind of rude behavior from liberals?

CALLER: Yeah.

RUSH: How did it make you feel?

CALLER: I was actually really mad at them.

RUSH: Were you scared at all?

CALLER: Not really.

RUSH: You were just mad?

CALLER: Yeah.

RUSH: Did they try to shut down the seminar? Did they succeed in doing that?

CALLER: No.

RUSH: How many of them were there?

CALLER: I think there were about 2,000 people there, and there were probably maybe 20 of them.

RUSH: Twenty agitators, 20 community organizers showed up –

CALLER: Yeah.

RUSH: — to try to disrupt the thing, but they failed, essentially?

CALLER: Hm-hm.

RUSH: Now, you knew that this was liberal behavior before you went there, you just had never seen it in person?

CALLER: Yeah.

RUSH: Seeing it in person has a much more powerful impact than just watching it on television. Watching it on television, you’re not really there. You see it on TV so much, it doesn’t have any impact. But when you’re there, like you were, profound impact. Well, that is pretty much standard operating behavior for American libs. Well, it is, Snerdley. People think I’m going to be misleading this young girl, but I’m not. They’re constantly mad; they’re constantly angry; they don’t want to debate whatever is being debated. They want to shut down any discussion of a position that’s not theirs, because they’re afraid that the 2,000 people there were going to be persuaded to agree with a concept that they don’t agree with. So, rather than debate it, they wanted to shut it down. This is how they operate. It’s intimidation. These people were probably paid, too.

CALLER: Most of them looked like they were college students.

RUSH: Yeah. I’m sure they’re just saving up money for the next party, kegger, whatever. Well, good, how did it end up? Did the seminar end up being okay and you learned more about it than you knew before you went in?

CALLER: Yeah, I learned a lot, actually.

RUSH: Is there one thing that stood out that you learned?

CALLER: The global cooling that they talked about like a couple years back when my dad was in school, and there was global warming that was way worse before, the earth fluctuates in temperature.

RUSH: Yeah. That’s right. By the way, your dad was in school more than two years ago, I hope.

CALLER: Yeah.

RUSH: ‘Cause you’re talking about the covers of Newsweek and TIME Magazine back in 1979. They were talking about the coming ice back then. I want to give you, Alyssa, a closing thought that will help you to understand liberals even more. Let’s take the global warming debate, and this has to do with what I call the vanity and the total lack of humility that these people have. The earth is billions of years old. The earth, as you learned, has gone through cycles of heat and cooling, warmth and freezing, that are beyond the ability of any earthly creature, human or otherwise, to influence. We can influence our environment, we have air-conditioning and heat. But we can’t change the climate, we never have been able to. But for some reason, throughout all these billions of years, the last 20 or 30, which are so microscopic a grain of sand does not represent the size of the last 30 years in just a hundred years. I mean we are so infinitesimal a part of this planet, yet the last 30 years all of these people, Alyssa, say that everything that is now is normal. The level of ice, the temperatures, average temperatures around the world, the amount of rainfall, cloud cover, everything now is what is normal, and any variation is a disaster.

Any variation or trend toward any variation is a disaster. Now, what kind of arrogance does it require for a living human being to think that in the full breadth and scope of world history, that their little irrelevant period of time on it is the way it’s always been or is even optimum and the best? The world is constantly moving and shaping. Your dad someday is going to take you to the Grand Canyon. Your dad someday is going to take you to Arizona, and you’re going to see big mountains, and you’re going to learn, you’re going to see lines and scales all up and down the sides of the canyons and you’re going to be told that what you’re looking at used to be thousands of feet under water, and what you’re looking at is sediment lines. And you look up, and it’s thousands of feet in the air, hundreds of feet in the air. What? Under water? And then you’re going to ask yourself how in the world could I have seen to it that all these rocks that were under water somehow became mountains on the surface? You couldn’t have done it. It’s just happened, and that’s how the climate operates. You got a great head start thanks to your dad taking you to this thing. It’s great that he did. Alyssa, thanks for the call. Appreciate it.

END TRANSCRIPT

Federal Budget Deficit Skyrockets; $163,000 More in Taxes

by Hans Bader on April 10, 2009 · 3 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Politics as Usual, Stimulus to Nowhere

“The budget deficit increased by $192.3 billion in March, and is near $1 trillion just halfway through the budget year.”

It’s going to get worse. The Obama Administration’s proposed budgets would produce $9.3 trillion in red ink, more than double the $4.4 trillion in red ink that would have been produced by Bush’s already huge budgets. Economist Michael J. Boskin estimates that Obama’s plans will result in $163,000 in increased taxes in the future for the typical tax-paying family.

Balanced budgets won’t return even in the long run. Obama claims that a revived economy will eventually cut the deficit. But the Congressional Budget Office says his $800 billion stimulus package will actually cut the size of the economy in the long run, contradicting Obama’s claims that it was needed to avert “irreversible decline.” That was just one in a long line of broken promises and false claims from Obama, like his claims that he would enact a “net spending cut” and not raise taxes on people making less than $250,000 a year.

Economists and scholars explain some of the government mistakes that created this recession.

Obama is spending $250 billion to bail out irresponsible mortgage borrowers across the country, some of whom have high incomes and modest mortgage payments. Law professor and financial expert Todd Zywicki argues that Obama is misguided to use taxpayer money in a vain effort to to keep the housing bubble from popping. He notes that the bubble was the product of artificially low short-term interest rates promoted by the federal government, and that the mortgage crisis is concentrated in just 9 states.

Jack Dreyfus, FDA Reform Pioneer

by Greg Conko on April 10, 2009 · 1 comment

in Healthcare, Legal, Nanny State, Personal Liberty, Precaution & Risk, Regulation

My colleague John Berlau wrote a nice obituary of mutual fund pioneer Jack Dreyfus that was published in Investor’s Business Daily earlier this week. One thing John points out that few readers are likely to have known about Dreyfus is his long-time advocacy of more liberal FDA regulation of off-label drug promotion.

FDA has the statutory authority to regulate promotional materials distributed by pharmaceutical companies about their products, and the agency imposes a near-total ban on distributing information about unapproved, or so-called off-label, uses. Once FDA approves a drug for any indication, doctors are free to prescribe it for any other use. The practice is so widespread that an estimated 60 percent of all prescriptions are for off-label uses. In some cases, off-label use is considered the standard of medicine, and doctors can be liable for malpractice if they do not prescribe that drug off-label.

Still, FDA likes control. Until recently, it even forbade the distribution of article reprints from peer-reviewed medical journals describing the results of clinical trials on off-lable uses. When the Bush Administration FDA proposed in 2007, and published in 2009, a guidance document permitting limited distribution of peer-reviewed journal articles, FDA critics such as Rep. Henry Waxman pitched a fit. And, according to an article in this week’s New England Journal of Medicine, there is reason to believe that the Obama Administration will revisit the issue and may rescind the guidance document.

According to Berlau, Dreyfus once wrote that, “Apparently full disclosure is required on the negative side, but no disclosure is permitted when the evidence is positive, unless it has an FDA-listed indication of use … No matter how flimsy the evidence for the negative, it must be disclosed. No matter how solid the positive evidence, it may not be mentioned. It seems a poor way to run a railroad.” Indeed.

AIG CEO Liddy owns millions in stock in bailout beneficiary Goldman — Tim Carney blockbuster in DC Examiner

by John Berlau on April 10, 2009

in Bailout Watch, Features, Odds & Ends, Politics as Usual

Everyone should read the blockbuster exclusive in today’s Washington Examiner in which Timothy P. Carney confirms that American International Group CEO Edward Liddy — appointed to his position at the behest of Hank Paulson and Tim Geithner after the government takeover of AIG in September — still owns more than $3 million in stock in Goldman Sachs, one of the biggest beneficiaries of the AIG bailout.

I am privileged to be quoted in this article that both breaks news and puts it into an informative policy context. The dogged investigative reporting conducted for this piece by Carney, a former Warren T. Brookes Journalism Fellow at CEI, should be enough to garner him several awards, and in my opinion this piece and likely follow-ups may be Pulitzer Prize-worthy material.

A couple weeks ago, after the brouhaha about the “retention” bonuses paid to the AIG Financial Products employees, Liddy’s calm demeanor before Congress and the media helped diffuse the situation. He emphasized that he was making a nominal $1-a-year salary and argued he was doing the CEO stint merely as a public service. Liddy wrote in a recent Washington Post op-ed that “my annual salary is $1. My only stake is my reputation.”

But Carney found that Liddy was not telling the whole story about his real stake in the AIG bailout. Namely that Liddy, as Carney notes, has “an acute financial stake in one of AIG’s counterparties—namely, his $3.2 million personal investment in Goldman Sachs.” And under Liddy’s direction, AIG disbursed nearly $13 billion from the taxpayer bailout money to Goldman, in a move many say is more disturbing than the employee bonuses that were the source of the recent controversey.

Everyone from former AIG CEO Maurice “Hank” Greenberg to liberal Rep. Brad Sherman, D-Calif., have expressed outrage that Goldman and other banks were compensated at full value for their derivative contracts. Goldman had bought billions in credit deafalt swaps from AIG. Had AIG gone into bankruptcy, Goldman and other counterparties would have almost certainly had to take a “haircut” on the contracts due to declining market conditions.

In the article, Carney generously writes that “there is no reason to believe Liddy is influencing AIG actions to unfairly benefit Goldman.” Yet Liddy had to be aware that many were saying Goldman may not have survived the hit if AIG substantially reduced payment. He resigned his position from Goldman’s board of directors when he became CEO of AIG, ostensibly to avoid conflict of interest, but has not seen fit yet to sell his more than 27,000 shares in Goldman stock, which he is listed as holding in the firm’s 2008 proxy statement. Carney reports that “an AIG spokeswoman confirmed for the Examiner that Liddy still owns all these shares.”

Carney points out the paradox of “strange public-private chimeras like AIG spawned in this age of bailouts.” When it bailed out the firm, the government took an 79.9 percent stake in AIG, making AIG in one sense a government entity. Yet, as Carney points out, this “situation represents a potential conflict of interest that would never be allowed in a government agency.”

It also likely wouldn’t fly in a purely private company, where directors and shareholders are on guard against executives’ “related party transactions” that aren’t in the company’s best interest. Yet, because he is running a public-private hybrid, Liddy lacks accountability to both to private shareholders and government ethics rules

Former Treasury Secretary Paulson, himself a former Goldman Sachs CEO, has a lot to answer for in forcing out AIG CEO Robert Willumstad and bringing on Liddy to replace him. So does Geithner, who was heavily involved in the AIG bailout as president of the Federal Reserve Bank of New York. Why did they not insist that Liddy divest his holdings or find someone who didn’t have this conflict?

Above all, this shatters the illusion that the government can magaically take over a company, fire the CEO, and run it more efficiently for the taxpayers. I have written before on Open Market that Obama’s firing of Rick Wagoner was not the first time the government forced out a CEO. Even before Paulson ousted Willumstad after the bailout, then- New York Attorney General Eliot Spitzer effectively forced out longtime AIG CEO Greenberg on baseless charges that have almost all been dropped. Greenberg built up AIG successful 35-year tenure, and has testified that the issuance housing-related credit defaut swaps at the center of the firm’s problem exploded in the months after he left.

As I tell Carney in concluding paragraph of the story, “The whole AIG experience demonstrates the fallacy that the government can efficiently sack CEOs and replace them.”

Liberal Bootlicking

by Hans Bader on April 10, 2009

in International, Legal, Politics as Usual

Members of the Congressional Black Caucus recently visited Cuba and licked Casto’s boots, calling him an “inspiring” visionary and an “amazing human being.” (Never mind that racism against people of African heritage is far more pervasive in Cuba than here. Much of Cuba’s population is black. But how many of Cuba’s Communist leaders are black? Almost none. It’s no accident.)

The Obama Administration has broken campaign promises repeatedly and lied about a Supreme Court case that it made a big campaign issue.

Now, as Charles Krauthammer notes in the Washington Post, Obama is going through Europe, badmouthing the U.S. to try and curry favor with the European public. European leaders have responded by stiffing Obama and giving him none of what he asked for (like assistance in Afghanistan). Obama said there must consequences, not just empty words, against North Korea for shooting a missile over Japan, even as he voiced only empty words (“Rules must be binding. Violations must be punished. Words must mean something,” he said). The only concrete defense proposal Obama made is to cut the U.S.’s stockpile of nukes and eliminate Alaskan missile defense systems that might be useful against North Korean missiles. As Obama explains, only the U.S. has ever used nuclear weapons.

Meanwhile, in a gaffe that most of the press chose not to report, Vice President Biden thanked Spanish Prime Minister Zapatero for his support in Iraq — even though Zapatero is anti-American and not only pulled Spain’s troops out of Iraq, but called on other European leaders assisting the U.S. to stop doing so.

With the U.S. government unable to even remember who its friends and enemies are, it’s perhaps not surprising that Somali pirates have been emboldened to kidnap American seamen and seize our ships in the crucial shipping lanes leading to the Suez Canal. CEI’s Eli Lehrer has come up with a creative solution for the pirate problem.

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